Blaming economic factors such as the ongoing eurozone crisis, Bank governor Sir Mervyn King said inflation was likely to remain above the government’s 2pc target for the next year or so.

The news will be a particular blow to savers, who have struggled to find returns that keep pace with inflation, once tax has been taken into consideration, and analysts said the Bank’s continued bad news about inflation was affecting its credibility.

“Controlling inflation is one of the primary mandates of the Bank of England,” said Nick Hopkinson, director of property company PPR Estates.

“Unfortunately, Mervyn King looks increasingly like King Canute trying to order back the sea in his attempts to both predict and control inflation.

“After nearly 30 consecutive months of ‘unexpectedly’ high inflation, the Bank’s forecasting credibility is pretty much used up.

“Interest rates are no longer an effective weapon against UK inflation and, in fact, many homeowners have already seen their monthly mortgage costs increasing this year.”